Payroll Positivity Pushes Dollar Higher

Weekly Report - 09/07/2017

Strong US Job Creation Helps Reverse Dollar Losing Streak


In spite of concerns surrounding the pace of general economic activity, the US labor economy showed tremendous strength during the month of June according to the latest payroll figures unveiled by the Bureau of Labor Statistics.  As the dollar pushed higher haven demand slipped, pushing gold to new multi-month lows.

Last Week

Helping to further the Federal Reserve’s interest rate normalization ambitions, the latest employment figures released on Friday gave the impression that US job creation was humming along.  According to the latest nonfarm payroll figures, employment rose by 222,000 jobs during the month of June, helped in part by the higher revision of the May figure to 152,000.  Nevertheless, overall unemployment ticked modestly higher despite better labor force participation.  The FOMC Meeting Minutes released earlier in the week indicated the overall softening in inflation was not enough to prevent further efforts towards tightening monetary policy.

Contrasting with the modest rise in US unemployment was the comparable Canadian figure which surprisingly saw overall joblessness fall to 6.50% from 6.60% reported back in May.  Apart from these major data points, the rest of the week was mostly quiet aside from the Reserve Bank of Australia interest rate decision which saw the key rate remain on hold at 1.50%.  On the commodity front, gold prices fell just above $1207.00 per troy ounce before trending back towards $1213.00 after the US payrolls figure sent the US dollar surging higher.  Oil ended the week lower as well despite falling inventories as surging US production hurt speculation that the energy glut is fading.


The Week Ahead

Topping the list of the upcoming events is US Federal Reserve Chair Janet Yellen’s semiannual testimony.  Apart from her prepared remarks, she will be taking numerous questions from American legislators about monetary policy and banking oversight. Alongside Yellen, US inflation figures are set for release.  Annualized PPI is forecast to fall to 1.90% in June from 2.40% a month earlier while CPI tapers to 1.70% from 1.90%.  Core consumer price inflation is expected to remain on hold at 1.70%.  China will also be announcing June inflation figures, with both CPI and PPI inflation projected to stay on hold at 1.50% and 5.50% respectively.  On the subject of trade, the surplus is forecast to widen modestly thanks to a pullback in import growth.  The current consensus is calling for 8.70% annualized export growth through the end of June whereas imports are forecast to slip to 13.10% expansion.

Switching gears, the Bank of Canada is set to publicize its latest policy decision, with no change forecast for interest rates.  The more interesting development will be revised economic projections, especially considering rising interest rate hike speculation.  Finally, the UK will be revealing the unemployment rate, which is projected to remain on hold at 4.60%.


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